We present a two-country New Open Economy Macroeconomics model of a currency union featuring an overlapping generations structure of the Blanchard (1985)-Yaari (1965) type as well as monopolistic frictions and staggered adjustment in the goods and labor market. We allow for public investment and...

We present an analytically tractable two-country New Open Economy Macroeconomics model of a currency union featuring an overlapping gen- erations structure of the Blanchard (1985)-Yaari (1965) type. It enables us to study the transmission and spillover effects of a wider range of fiscal shocks...

We run a real exchange rate forecasting "horse race", which highlights that two principles hold. First, forecasts should not replicate the high volatility of exchange rates observed in sample. Second, models should exploit the mean reversion of the real exchange rate over long horizons. Abiding...

This paper investigates the effciency of monetary and fiscal policy in a two-country general equilibrium model with monopolistic competition and wage stickiness. When monopoly distortions are completely eliminated, we find that stochastic government spending can affect the efficiency of global...

This paper investigates the efficiency of monetary and fiscal policy in a two-country general equilibrium model with monopolistic competition and wage stickiness. When monopoly distortions are completely eliminated, we find that stochastic government spending can affect the efficiency of the...

In an estimated two-country DSGE model, we find that shocks to the marginal efficiency of investment account for more than half of the forecast variance of cyclical fluctuations in the US trade balance. Both domestic and foreign marginal efficiency shocks have a substantial impact on the...

This study first conducts a detailed survey on recently emerged new field in economics called new open economy macroeconomics and then carries out an empirical test of theoretical predictions of these models to observe transmission effects of Indian economic shocks in South Asia region. In the...

This study first conducts a detailed survey on recently emerged new field in economics called new open economy macroeconomics and then carries out an empirical test of theoretical predictions of these models to observe transmission effects of Indian economic shocks in South Asia region. In the...

The paper offers a survey of recent research on fiscal policy in both deterministic and stochastic models of the New Open Economy Macroeconomics (NOEM) initiated by Obstfeld and Rogoff (1995, 2002b). The survey includes a comparison of the implications of the deterministic benchmark model to the...

This paper employs a small open economy DSGE model, estimated over 1986- 2009, to decompose the dynamic influence of domestic and international prices on the Canada-US real exchange rate. While the real exchange rate mimics the dynamic behavior of the relative price of non-tradables in terms of...

In this paper, I review the literature on the formulation and estimation of dynamic stochastic general equilibrium (DSGE) models with a special emphasis on Bayesian methods. First, I discuss the evolution of DSGE models over the last couple of decades. Second, I explain why the profession has...

Building on the New Area Wide Model, we develop a 4-region macroeconomic model of the euro area and the world economy. The model (EAGLE, Euro Area and Global Economy model) is microfounded and designed for conducting quantitative policy analysis of macroeconomic interdependence across regions...

The purpose of this paper is to investigate New Open Economy Macroeconomics in an empirical way in order to analyze the ability of these models in explaining key variables: exchange rate and current account. A standard two-country dynamic stochastic general equilibrium model with nominal...

With heterogeneous productivity and sticky prices in the short run, exchange rate changes can generate real effects on agents in the economy; the result is that the currency regime becomes a policy variable amenable to political competition. This paper discusses how special interests and...

There is a wide acceptance that gains to international monetary policy coordination are small at best and that the need of policy coordination is questionable. This conclusion, however, follows from the underlying presumption that monetary policy is concerned with the stabilization of...

We discuss how the welfare ranking of fixed and flexible exchange rate regimes in a New Open Economy Macroeconomics model depends on the interplay between the degree of exchange rate pass-through and the elasticity of substitution between home and foreign goods. We identify combinations of these...

This paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a “New Open Economy” model having prices sticky in the producer’s currency can reproduce the observed fluctuations qualitatively. The answer is...

This paper investigates the business cycle fluctuations of the tradeable and nontradeable sectors of the US economy. Then, it evaluates whether a “New Open Economy” model having prices sticky in the producer’s currency can re¬produce the observed fluctuations qualitatively. The answer is...